Abu Dhabi, UAEFriday 3 April 2020

Homefront: 'Can a new developer dictate terms on a delayed project?'

A new developer plans to take on an unfinished Dubai development, leaving investors concerned

Building work on the Dubai Sports City development started 10 years ago.  Antonie Robertson/The National
Building work on the Dubai Sports City development started 10 years ago.  Antonie Robertson/The National

I invested in a three-bedroom property in Dubai Sports City many years ago which was never built. The developer could not complete the project financially and left the country around seven years ago. Later, we discovered the developer was imprisoned in his home country because of issues relating to a separate project there.

Meanwhile, the development I and a number of investors have bought into has been at a standstill for 10 years and is about 40 per cent complete. This leaves us with a missing developer who has never reached out to investors and is unable to do anything to resolve the project. Technically we have no developer.

We have met with the Real Estate Regulatory Agency several times and proposed auctioning the project to a new developer. Recently, a new developer has been in talks to take on the project. However, can the new developer dictate their own terms and conditions? Or by law, does the new developer have to go by the Sales and Purchasing Agreement investors received from the original developer? We've heard the new developer wants investors to pay their remaining balance and also an extra charge per square foot upfront. If investors can't pay, the investors will lose their flats. Where do we stand? AM, Dubai

It is difficult to give one definitive answer to your question as the situation is quite complicated. When an old developer leaves a project and a new developer comes in, the scenario of the potential outcomes (going forward) are governed by The Higher Real Estate committee at the Dubai Land Department which oversees suspended or terminated projects.

If the new developer wishes to materially change any aspects of the building or previous contracts, it has to submit technical drawings and its observations to this committee for approval. If the committee approves the changes or drawings, then those changes can be implemented by the new developer.

To answer your question on how this affects you as an investor, I have created an example scenario. If an investor purchased a 1,000 square foot (93 square metre) corner-view apartment but now the new developer (with the approval) is proposing the same investor accepts an 800 sq ft property that is not a corner view apartment, the investor has the following options:

1. The investor accepts it and moves on.

2. The investor refuses and requests his money back.

3). The investor accepts but requests compensation from the new developer as a result of the changes to the architectural drawings.

As you can see, there are many ways the developer can potentially play with this new building, all of course subject to the DLD approvals. How this affects you as an investor will be determined by what you do next. Each investor must decide what action to take based on the changes put in place by the new developer, with the situation overseen by the new committee, which is handling the arrangements between the new developer and the investors.

Another option is to use a real estate lawyer, who could look at your case further and advise accordingly.

Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for 35 years in London and Dubai

The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario.volpi@engelvoelkers.com

Updated: February 12, 2020 10:44 AM

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